GE Healthymagination Fund looking for startups to invest in

GE’s nearly two-and-a-half-year-old, $250 million Healthymagination Fund still has a “lot of dry powder” and executives are looking for promising startups to invest in.

Noah Lewis, managing director of the Healthymagination Fund, and a colleague were out broadcasting the fund’s capabilities while meeting new companies at the IBF MedTech Investing Conference in Minneapolis last week. In the midst of that, Lewis took some time to talk about the fund, the investment criteria and what GE brings to the table. Below is an edited version of the interview.

How much of the $250 million have you invested?

For competitive reasons, we don’t disclose that, but we have a lot of dry powder. We’re more opportunity short than capital short, which is a great place to be in in this environment given some of the fundraising challenges that promising medtech companies are experiencing.

What kind of medical technology companies are you looking at?

The GE Healthymagination Fund looks for investments that correspond with sectors that we know well. For us really that falls into a few categories — life science instruments, consumables, in vitro blood-based diagnostic systems and classic medtech, which includes medical imaging, clinical systems, devices and patient monitoring.

So, if you took the entire healthcare startup landscape and took out pharmaceuticals and permanent implantables, we pretty much operate in everything else. Health IT, too.

What kind of investment criteria do you have?

Our sweet spot is typically series B and later. Most often we like to work with a syndicate of investors. We have a few partners that we have publicly announced — for example, Kleiner Perkins Caufield Byers, Mohr Davidow and MPM Capital.

Our criteria are about strong IP, solid path to commercialization; a lot of clinical evidence to show that it can fundamentally change the quality of care. We are not about incrementals. We are about significant disruption.

You said you invest in consumables. Can you give an example?

You are seeing convergence across the healthcare landscape. And so an interesting company that we just invested in, which was our first investment, is in Israel called Check-Cap. Check-Cap is changing the standard of care in colon cancer screening. Rather than the current standard for colon cancer screening, where you prep, you clean out your GI tract, you have an endoscope inserted, they have actually invented an ingestable, miniature, X-ray pill that you swallow and it goes through and transmits diagnostic imaging digitally to a wristwatch-type device, which is then seen and reviewed by a clinician.

It’s a consumable. So, you’ve taken what was a large footprint X-ray or CAT scan and made it a consumable. It stays in pill format, gets excreted in the toilet and is environmentally safe.

This is an example of a strategic collaboration where we actually have a formal supply agreement to help them manufacture the product.

Are you able to help companies in prototyping?

We are able to bring the power of GE resources globally. So, that’s our global supply chain of GE Healthcare; our global research center where there are 3,000 Ph.Ds. — New York, Bangalore, Ireland — or our engineering staff of over 10,000 engineers in GE Healthcare that help with product development. So, from early proof of concept to prototyping to taking cost out of a product to drive more attractive margins, we can help across the entire spectrum.

Do you share the general gloom of other investors that regulatory challenges will kill U.S. innovation?

First of all, GE is bullish about the healthcare market in general. Different from other financial investors, I think we’ve always been a global company and we continue to be a global company. We bring about 500 products to market every few years across the globe and so we are very accustomed to working with the FDA of course, but also every European regulatory body in addition to the SFDA in China and [regulatory bodies in] Latin America.

So, we are not really fazed by the challenge of commercialization. There have been slowdowns to which our organic business has had to work through, just like startups in the U.S.

But in general, we see healthcare as a very good business. We are able to advise portfolio companies on the quickest, most efficient way to market.

Can you talk about some investments you have made in the U.S.?

In the U.S., we’ve invested in NanoString Technologies in Seattle. They have a breast cancer diagnostic assay called the Pam50, which is really showing positive results that are equal if not superior to the leading standard of care — Oncotype DX.

In addition, we are invested in a really neat St. Louis company called Veran Medical Technologies, which is an in-organ guidance system that is really changing the care for therapy guidance.

In addition, we have invested in a company called CardioDX, which has the leading in vitro diagnostic test for cardiovascular disease.

You said a third of your investments are made overseas. Are those companies developing product for the local market?

This is one of the things that differentiates us. Given that we create products every day, it’s old thinking to say that you can strip down a product and then export it to different geographies. So, we look at it from an in country for country perspective both organically and inorganically.

The healthcare models patients need and providers need differ based on geographies, and we are attuned to those local needs. Although there are some products that can be globalized as is, typically it really benefits the business case, the investors and the company to think locally.

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